Impact of Russia/Ukraine War on Aviation Insurance

As the conflict between Russia and Ukraine continues to rage on, our thoughts are with everyone affected, and we hope there is swift resolution on the horizon. Insurance losses are far from the most relevant byproducts of this war, but they will be discussed here for relevance to the general aviation community. Our friends at AIN Online put together the following excerpt which highlights the potential impact to insurers as it relates to this conflict. This may not seem like it has any direct impact here in the US, but it most certainly will. Most of the insurance carriers covering the war risks of the aircraft left in Russia are the same carriers insuring domestic aircraft here in the States. The magnitude of the war losses could further entrench aviation insurance in the hard market for many years to come:

  • The already hard aviation insurance market could become even harder if Russia confiscates the more than 500 airplanes in the country that are financed or owned by non-Russian lessors and have been stranded by Western sanctions against Russia. Insurers and reinsurers are thus faced with potential claims as high as $10 billion, which for aircraft owners/operators would result in increased premiums, additional exclusion clauses, and more dropped policies, according to Fitch Ratings.
  • These lessors have hull and liability insurance, as well as specific aviation war cover, and will call on their insurance to be indemnified against expropriation of their airplanes. Most aviation policies are underwritten through the Lloyd’s of London market, and Fitch Ratings estimates that 30 to 40 percent of primary insurers’ exposure is ceded to reinsurers.
  • Fitch Ratings said it is hard to quantify ultimate claims with a high degree of certainty, as outcomes are likely to be subject to legal disputes. Industry experts estimate the total insured residual value of the grounded aircraft at $13 billion. Aggregate loss limits written into policies mean potential hull insurance claims should be $5 billion to $6 billion but, in the worst case, could be as high as $10 billion, according to Fitch Ratings. The latter figure “would be by far the largest annual claims in the history of aviation insurance,” it concluded.